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Chapter

11Global Products

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Introduction

Global products are usually standardizedGlobal brand examples

Gillette razor blades

Sony television sets

Benetton sweaters

Regional products and brands are unique to a particular trading region

Hondas European car model P& Gs Ariel and Vizir in Europe

Koreas ginseng tea makers covering the Asian market

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The Pros and Cons of Standardization

The Advantages of Standardization

Cost Reduction

Improved Quality

Enhanced Customer PreferenceGlobal Customers

Global Segments

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The Pros and Cons of Standardization

The Drawbacks of Standardization

Off-Target

Lack of Uniqueness

Vulnerability to Trade BarriersStrong Local Competitors

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Localization versus Adaptation

Basic Requirements

Localization

Generally speaking, localization avoids having potential customers rejectthe product out of hand

Compatibility Requirements

Localization represents the adjustments in the product specificationsnecessary for it to function in the foreign environment

Multisystem CompatibilityIn many products today, localization is accomplished by building incompatibility with multiple systems at the outset

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Pitfalls of Global Standardization

Reasons for Product Standardization Failure

Insufficient Market ResearchSimilarities among customers are often assumed rather than proved

OverstandardizationStandardization should not encroach onto the positioning strategy

Poor Follow-UpFollow up needs to be implemented if a campaign is to succeed

Narrow VisionThe vision at the headquarters should not be narrow and inflexible

Rigid ImplementationSome flexibility in implementation needs to be retained by local units

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Global Product Lines

Reasons for Product Line Differences

HistoryDifferent local products were well established before standardization was feasible

M&A (Mergers & Acquisitions)Complete integration is difficult if the product lines are formed through M&A

PreferencesDifferences in preferences give strategic rationale for product line customization

CapacityGlobal product lines need large production capacity

ChannelsDifferences in channel structure make it difficult to support the same product lines

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Developing New Global Products

Five Stages of the New Product Development Process

Idea Generation

Local subsidiaries are likely to have some ideas from their respectivemarkets and new technology is a common source of new product ideas

Preliminary Screening

The most immediate evaluation of an idea is whether it is compatible withthe company objectives, strategies, and resources.

Market Research

Focus Groups and Surveys

Focus groups offer the development team a chance to hear spontaneousreactions to a new concept and hear suggestions for improvement

The survey addition is useful with global products and different country sites

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Developing New Global Products

Five Stages (contd)

Concept Testing

A more formal approach to selecting product attributes is usingtechniques such as trade-off analysis or conjoint analysis

Target Product Research

By analyzing the leading brands and their attributes, companies are ableto understand what appeals to their consumers

Sales ForecastThe appropriate sales forecast approach is based on the product life cycle

Test MarketingOnce the sales forecast looks promising, the new product is usually placedin production and test marketed (see Ch. 4)

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Globalizing Successful New Products

New Product Success Factors

The most important factor determining new product success are therelative product advantage and technological synergy with acompanys existing products and processes

Global Diffusion

Five specific product-related factors

Relative advantage The leading cause of new product success

Compatibility Can the product be used without any problem?Complexity Is the new product easy to use?

Trialability Is it easy to try the new product?

Observability So, how much faster does it connect to the Internet?

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Globalizing Successful New Products

Global Diffusion

Three country-specific variables that influence innovative andimitative propensities

Cosmopolitanism

The degree to which a culture is open to outside influences

Geographic Mobility

Influences the propensity of imitation

The Proportion of Women in the WorkforceThe higher this proportion, the less time there is for innovation

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Global Brand Management

Brand Equity

The net revenues the brand can be expected to generate over time

Global BrandsThree advantages to using global brands

Demand spillover

Global customers

Scale economies

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Global Brand Management

The Brand Portfolio

At any point in time, companies are likely to have

A portfolio of a few global brands and several local brands

The brands are typically managed in a hierarchical fashion and can takeseveral forms

In one, the most important global brands are at the top, followed by regionaland local brands

Alternatively, the top can be the corporate brand, possibly global, followed by

subbranded model namesBrand sales tend to follow a cycle similar to the product life cycle

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Global Brand Management

Brand Globalization Potential

Questions about appropriateness or brand fit

Does the brand make sense outside of the source country?

If the name suggests a country association, is the effect positive?Is the name available legally in many countries?

Does the brand complement other global brands in the portfolio?

Should the growth be limited to the creation of a regional brand?

ImplementationIssues in implementing the globalization strategy

Is the globalization product-based?

Which local brands should be chosen for the changeover?

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Global Brand Management

Changeover Tactics

Once the target brands have been identified, standard brandchangeover tactics can be employed

The fade-in/fade-out gradual option is the most common

The global brand is linked to the local brand for a time, after which the local brand is dropped

A less gradual approach, sometimes called summary axing

Simply drops the local brand name and introduces the new brand

Using extensive forewarning is another approach to name changeover

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Defending Local Products

The typical reason for the success of local products is thecustomization involved

In industrial markets

Personal attention, fast delivery, and prompt after-sales service are allfactors tending to favor local products

In consumer goodsThe sameness of global products creates a potential for local products

in special niche segments of the market

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Counterfeit Products

Counterfeit or knockoffs are fake products designed and branded tomislead the unwary customer into assuming that they are genuine

Counterfeit products pose an ominous problem in the globalmarketplace

Firms make an effort to find the factories that turn out the counterfeitsand they track the fakes in the stores